What the Market Wants: Progress in EU Leads Market Rally
Progress in EU Leads Market Rally
By David Brown, Chief Market Strategist, Sabrient Systems
Last week, a general agreement among a number of major central banks (The Fed, ECB, Bank of England, Canada, Switzerland, and Japan) triggered a strong week of domestic market performance. Positive economic reports domestically throughout the week, including the surprise drop in unemployment to 8.6%, helped as well.
Over the weekend, Italy passed its austerity measures, and both Italian and Greek bond yields improved sharply this morning.
Today, the S&P 500 charged ahead again but ran into some headwind at the 200-Day moving average, around 1264 points. That, combined with two economic announcements that met or just missed expectations, exacerbated the 200-Day MA resistance. Then S&P warned that Germany and other highly rated countries might have downgrades in their future due to the crises throughout Europe. That warning seemed ill-timed unless it was meant to insure aggressive action at the December 9 EUC meeting (the last of the year).
Market Stats. Reflecting last week’s strong market, all cap styles were up big. Small-cap Growth led the way, up +10.6%. Large-cap Growth was the “worst,” gaining a strong +7.28%. Energy, Financials, and Basic Materials turned in the best sector performance, each up almost +10% for the week. Utilities dropped to the bottom, up +4%.
We are reiterating our cautious attitude towards investing. We’ve been cautious for some time now, but in light of the economic headwinds that have spurred rallies as well as led to precipitous drops, we believe it is the best approach. Buy bargains, and consider using the VXX (iPath S&P 500 VIX Short-Term Futures ETN) as a hedge.
3 Stock Ideas for this Market
This week, I used the GARP (growth at a reasonable price) preset search in MyStockFinder (http://MyStockFinder.com). I also included Buys, in addition to Strong Buys. Here are three stock ideas that look intriguing:
Occidental Petroleum Corporation (OXY) – Energy
Momenta Pharmaceuticals (MNTA) – Healthcare
Olympic Steel Inc. (ZEUS)—Non-Cyclical Consumer
Until next week,
David Brown
Chief Market Strategist
Sabrient Systems, LLC.
Leaders in Investment Research
http://www.sabrient.com
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Full disclosure: The author holds no positions in this week's "stock ideas."
Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Sabrient. Sabrient makes no representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.